Unpacking the deadlock: Why Dhaka airport’s 3rd terminal is still grounded
Caab hasn’t accepted Japanese consortium’s proposed model for revenue generation and expenditure
Highlights:
- Dhaka airport's third terminal launch delayed over operator dispute
- Caab rejects Japanese consortium's proposed revenue-sharing model
- Talks stalled; issue escalated to government-to-government level
- Biman to handle ground services temporarily under consortium oversight
- Delays risk expired equipment warranties, raising financial concerns
- Terminal promises 20M passenger capacity, tripling current operations
The chances of inaugurating the much-awaited third terminal of Dhaka airport during the interim government's tenure is gradually shrinking as the Civil Aviation Authority of Bangladesh (Caab) and the Japanese consortium have yet to reach an agreement on its operation.
Negotiations between the two sides have continued for months, but officials familiar with the talks said Bangladesh has not accepted the consortium's proposed model for revenue generation and expenditure.
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The final round of discussions, held between 7 and 9 September, ended without an agreement. However, the civil aviation ministry said talks remain ongoing.
"We are still in discussions. Since this is a government-to-government process, nothing can be said until a final decision," Civil Aviation Secretary Nasreen Jahan told The Business Standard.
A source close to the Japanese consortium said that, with no consensus reached, the matter will now move to the government-to-government level for resolution.
Meanwhile, before the final round of talks, Civil Aviation Adviser Sk Bashir Uddin said the government was ready to approach other international operators if the Japanese consortium declined to take responsibility for managing the new terminal.
"We remain in the same position," Adviser Bashir told TBS at a press conference on 25 September. "We want to begin operations as soon as possible. But it's not possible to set a launch date yet, as the necessary conditions have not been met," he said.
"Once the work is complete, the operator is finalised, and the handover process ends, we'll be able to decide on the opening. After that, a few months will be required for operational readiness," he added.
The adviser further said, "The selected operator must complete full operational testing and preparations with us before the terminal can be launched. It's a step-by-step process."
Where is the gap?
The Japanese consortium – comprising Japan Airport Terminal Company, Sumitomo, Sojitz, and Narita International Airport Corporation – was selected by the previous government to operate the third terminal under a public-private partnership (PPP) model.
However, following the change in government, the two sides have struggled to reach an understanding on key management issues.
Under the proposed arrangement, Biman Bangladesh Airlines would handle ground services for two years under the consortium's supervision, while data security responsibilities would remain with Caab.
Sumitomo is leading the consortium. When The Business Standard approached its Dhaka office for comment, representatives declined to speak on the matter.
However, a senior consortium official said the main disagreement lies in the financial model. "Caab hasn't accepted the revenue and expenditure framework we proposed."
The official added that the consortium's business model was designed to maintain world-class operational standards in line with Bangladesh's vision for the terminal. But Caab has yet to respond positively.
"The consultant from Bangladesh has based the financial assessment on Indian benchmarks for revenue and expenses. But this terminal was built with cutting-edge technology and a futuristic design, so applying regional standards would create a financial imbalance," the source explained.
He also said Caab is reluctant to share earnings from two of the most profitable revenue streams – the passenger safety fee and the airport development fee.
Once fully operational, the third terminal is expected to triple the airport's annual passenger capacity and double its cargo handling capability
"Without these operating expenses cannot be balanced through secondary income sources like royalties from ground handling, boarding bridges, or commercial shops," he argued.
Another consortium official said there is not a huge difference between our proposed revenue margin and the government's expectations. "We believe a settlement is still possible."
Since August 2020, passengers in Bangladesh have been paying both fees: Tk100 and Tk70 for domestic flights, $5 and $6 for Saarc routes, and $10 each for other international destinations.
The ground-handling arrangement with Biman is not a major obstacle, officials said. Still, the consortium has advised Caab to consider appointing an additional service provider to uphold international standards.
A senior Caab member said doubts remain about the project's financial viability. "Their revenue-sharing proposal is still unclear. We can't proceed unless the model ensures profitability for Bangladesh."
"Since this is a PPP project, revenue sharing is crucial. The consortium hasn't specified its expected profit margin. From their perspective, the model may not yet seem viable considering connectivity, investment returns, and other factors," he added.
Will stalemate affect future Japanese investment?
A key question now looms: if the Japanese consortium is not appointed to operate the terminal, could that decision strain future Japanese loans or investments in Bangladesh?
Adviser SK Bashir Uddin did not give a direct answer but clarified that the Japan International Cooperation Agency (Jica) is only the lender, not an investor.
"Jica is the loan provider here. The investment comes from the Bangladesh government," he said.
The third terminal project, launched in December 2019 at a cost of Tk21,300 crore, is largely funded by Jica, which provided Tk15,000 crore in soft loans. The remaining came from the government's own resources.
"This investment is also our responsibility. It's not just about improving passenger services; it's an economic commitment," Adviser Bashir said. "We're working together to bring the terminal into operation as soon as possible."
Jica's Dhaka office reiterated that it is not part of the operational discussions.
"While Jica is financing the construction, we aren't directly involved in the operation talks. These discussions are taking place between Caab and the Japanese consortium under a government-to-government framework, managed by the PPP Authority of Bangladesh and Japan's Ministry of Land, Infrastructure, Transport and Tourism," the agency said in a written response.
Impacts of delays on equipments
Built with Japanese assistance, the Tk21,000 crore state-of-the-art terminal at Hazrat Shahjalal International Airport is designed to serve 20 million passengers annually. The terminal features 26 boarding bridges, an automated baggage system, and enhanced passenger facilities.
It was soft-launched in October 2023, with full operations originally planned for December 2024. However, delays in equipment imports, leadership changes, and political transitions have pushed back the timeline once again.
After missing the December 2024 deadline, authorities set a new target of December 2025 to launch the third terminal, with 99.88% of construction already complete. However, Caab now cannot provide a definite date for its operation.
Meanwhile, concerns have emerged as warranties on some equipment and machinery have expired or are nearing expiry, prompting efforts to open the terminal quickly to avoid financial losses, a Caab official said.
On 4 August, a Biman flight became the first to use the passenger boarding bridge (PBB) and visual docking guidance system (VDGS) at the terminal. The airline described it as a key step in operational readiness and improved service capabilities.
Dhaka airport sources also said trial operations, including boarding bridge tests, are already underway. Around 6,000 personnel, including 4,000 security staff, will be needed in four shifts to run the terminal 24/7.
Once fully operational, the third terminal is expected to triple the airport's annual passenger capacity and double its cargo handling capability.
